Corporate Social Responsibility And Sustainable Business
CORPORATE SOCIALRESPONSIBILITYAND SUSTAINABLEBUSINESSA Guide to LeadershipTasks and FunctionsAlessia D’AmatoSybil HendersonSue FlorenceC E N T E RF O RC R E A T I V EL E A D E R S H I P
Corporate SocialResponsibility andSustainable BusinessA Guide to LeadershipTasks and Functions
Corporate SocialResponsibility andSustainable BusinessA Guide to LeadershipTasks and FunctionsAlessia D’AmatoSybil HendersonSue FlorenceCenter for Creative LeadershipGreensboro, North Carolina
The Center for Creative Leadership is an international, nonprofit educational institutionfounded in 1970 to advance the understanding, practice, and development of leadershipfor the benefit of society worldwide. As a part of this mission, it publishes books andreports that aim to contribute to a general process of inquiry and understanding in whichideas related to leadership are raised, exchanged, and evaluated. The ideas presented in itspublications are those of the author or authors.The Center thanks you for supporting its work through the purchase of this volume. Ifyou have comments, suggestions, or questions about any CCL Press publication, pleasecontact the Director of Publications at the address given below.Center for Creative LeadershipPost Office Box 26300Greensboro, North Carolina 27438-6300www.ccl.orgCCL Stock No. 355 2009 Center for Creative LeadershipAll rights reserved. No part of this publication may be reproduced, stored in a retrievalsystem, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher.Published by CCL PressMartin Wilcox, Director of PublicationsPeter Scisco, Editor, CCL PressKaren Lewis, Associate EditorJoanne Ferguson, Production EditorCover design by Joanne FergusonISBN 978-1-60491-063-6
vTable of ContentsIntroduction . . 1Purpose, Method, and Framework for This Publication . 2Key Themes . 3Approaches to Implementing CSR. 4Drivers of Ongoing Commitment. 4Corporate Identity and Ethics. 5CSR and Accountability. 6Partnering with Stakeholders. 7Leadership Capabilities and Competencies. 8Organizational Challenges and Limitations. 10Conclusion . 11Annotated Bibliography . 12Author Index . 89Title Index . . 91
1IntroductionCorporations around the world are struggling with a new role, which is tomeet the needs of the present generation without compromising the ability ofthe next generations to meet their own needs. Organizations are being calledupon to take responsibility for the ways their operations impact societies andthe natural environment. They are also being asked to apply sustainabilityprinciples to the ways in which they conduct their business. Sustainabilityrefers to an organization’s activities, typically considered voluntary, that demonstrate the inclusion of social and environmental concerns in business operations and in interactions with stakeholders (van Marrewijk & Verre, 2003).It is no longer acceptable for a corporation to experience economicprosperity in isolation from those agents impacted by its actions. A firm mustnow focus its attention on both increasing its bottom line and being a goodcorporate citizen. Keeping abreast of global trends and remaining committedto financial obligations to deliver both private and public benefits have forcedorganizations to reshape their frameworks, rules, and business models. Tounderstand and enhance current efforts, the most socially responsible organizations continue to revise their short- and long-term agendas, to stay ahead ofrapidly changing challenges.In addition, a stark and complex shift has occurred in how organizationsmust understand themselves in relation to a wide variety of both local andglobal stakeholders. The quality of relationships that a company has with itsemployees and other key stakeholders—such as customers, investors, suppliers, public and governmental officials, activists, and communities—is crucialto its success, as is its ability to respond to competitive conditions and corporate social responsibility (CSR). These major transformations require nationaland global companies to approach their business in terms of sustainabledevelopment, and both individual and organizational leadership plays a majorrole in this change.Organizations have developed a variety of strategies for dealing withthis intersection of societal needs, the natural environment, and correspondingbusiness imperatives. Organizations can also be considered on a developmental continuum with respect to how deeply and how well they are integratingsocial responsibility approaches into both strategy and daily operations worldwide. At one end of the continuum are organizations that do not acknowledgeany responsibility to society and the environment. And on the other end ofthe continuum are those organizations that view their operations as havinga significant impact as well as reliance on society at the economic, social,and ecological levels, thus resulting in a sense of responsibility beyond the
2Corporate Social Responsibility and Sustainable Businesstraditional boundaries of the organization. Most organizations can be placedsomewhere in between.Corporate responsibility or sustainability is therefore a prominent feature of the business and society literature, addressing topics of business ethics,corporate social performance, global corporate citizenship, and stakeholdermanagement. Management education can be an important source of new ideasabout shifting toward an integrated rather than fractured knowledge economy,but this means also that the role and meaning of socially responsible leadership needs to be updated. Much further research is needed to create a clearerunderstanding of what is required, both in leadership itself and in the field ofleadership development.In the following, we present the state of the art of knowledge related toCSR and the role of leadership. We highlight some current developments onthis topic and draw attention to similarities and differences in the three anglesof the triple bottom line (TBL)—the environmental, societal, and businessarenas. The field addresses complex and critical issues, such as human rights,environmental protection, equal opportunities for all, fair competition, andthe interdependencies that occur between organizations and society (Quinn,2008). Ongoing research reveals that a variety of strategies, alliances andpartnerships, and approaches are being used around the globe. The literaturealso reveals that although the aspiration of many corporations to contributeto a better world is great, translating that aspiration into reality proves to besomewhat of a challenge.Purpose, Method, and Framework for This PublicationThe purpose of this sourcebook is to provide an overview of the academicand business literature on CSR and leadership. To pull together this annotated collection of sources, the authors examined literature on CSR, corporatecitizenship, and sustainability, mainly from 2000 to the present. A snapshot ofthe current thinking, research, and opportunities for additional scholarship isprovided. We used three methods to select an adequate sample of articles andbooks for review: A systematic search of the academic and professional literature onleadership and CSR, as well as a keyword search using CSR synonyms (e.g., sustainability, corporate citizenship, corporate sustainability, ethical leadership, corporate governance, and corporatesocial performance). This strategy retrieved 211 documents.
3Key Themes A random search of articles and books on CSR. We searched databases and library catalogs using keywords such as corporate socialresponsibility, corporate citizenship, corporate sustainability, ethicalleadership, and leadership, as well as names of authors. A review of bibliographic references from articles found initially andan examination of class reading assignments from a graduate-levelethics and social responsibility course.All references come from scholarly journal articles, articles from thepopular press, books, book chapters, and practitioner and expert essays. Inmost cases, publications were selected that were published from 2000 onward, and material was selected that was directly related to one of the themesof CSR. Some not strictly academic articles were retained when they added adifferent perspective or complemented a theme previously identified.The key themes that emerged through the literature were the following: Approaches to CSR promotion and implementation CSR as business case versus development CSR and corporate identity and ethics CSR and accountability Stakeholders’ engagement or partnership Leader and leadership capabilities and competencies for CSR CSR’s challenges and limitationsAlthough we did not use a rigorous methodology to derive these themes, wefeel they provide a useful way to present an overview of the field and a framework for further research and study.Key ThemesThis section of the book introduces the reader to key themes in the field andrefers to the most representative publications for each. This overview does notaspire to provide a comprehensive picture of either the field or the full contentof the annotations that follow. The full scenario can only be understood by acomplete reading of the annotations themselves. Each of the annotations takesaccount of the purpose of the publication and provides a synopsis includingmajor points, findings, and the conclusions reached.
4Corporate Social Responsibility and Sustainable BusinessApproaches to Implementing CSRThe first theme we identified focuses on why CSR gets started in organizations and how it is or can be well implemented. As to why CSR getsstarted, some authors argue that CSR can be seen as either an integral part ofthe business strategy and corporate identity, or it can be used as a defensivepolicy, with the latter being used more often by companies targeted by activists. The rationale for CSR can be based on a moral argument, a rationalargument, or an economic argument (Werther & Chandler, 2006). Campbell(2007) is representative of a group of studies that create testable propositionsrelated to the conditions under which organizations will move toward CSR.He sees corporations’ level of social responsibility as being influenced byfactors such as financial conditions of the firm, health of the economy, andwell-enforced state regulations.Why companies take on CSR is also discussed in the literature in termsof the specific initiatives under which CSR may fall. Ways of describing theserationales vary, from the more skeptical view of cause-related marketing to amore generous attribution of genuine socially responsible business practices(Kotler & Lee, 2005).To ascertain how CSR is implemented in organizations, some researchuses a developmental framework to show change in awareness, strategy, andaction over time, and posits stages of CSR from elementary to transforming(e.g., Mirvis & Googins, 2006). Jackson and Nelson (2004) take more of ahow-to approach, offering a principle-based framework for mastering whatthey call the “new rules of the game.” Examples of principles include harnessing innovation for the public good, putting people at the center, and spreadingeconomic opportunity.Although there is substantial variation in the nature and the extent ofthe corporate approaches reflected in the literature, interest in the field seemspoised to stimulate further research and to provide both researchers and CSRpractitioners some valuable direction for action and reflection.Drivers of Ongoing CommitmentOngoing commitment can derive from either economic self-interest(i.e., a solid business case) or from ethical grounding (i.e., the moral importance of sustainable development). Oftentimes, of course, both of these apply.When the value added is considered to be significant and positive, thebusiness case will apply. Building the business case for CSR, Husted andAllen (2007) point out that much effort has focused on CSR in an attempt todemonstrate that positive CSR can be linked to improved financial perfor-
Key Themes5mance. There is a growing sense that looking after the people and the community as well as the environment are all relevant to long-term business survival.Though the business case for CSR appears strong, the literature also reflectsthe fact that there are doubts as well as cynicism (Jayne, 2004).A good example of the contrast between CSR as business case andCSR as ethical issue is reported by Hartman, Rubin, and Dhanda (2007). Inits cross-cultural analysis of communication of CSR activities in U.S. andEuropean corporations, the article demonstrates that U.S. companies justifyCSR using economics or bottom-line terms and arguments in their communications, whereas European Union companies rely more heavily on languageor the theories of citizenship, corporate accountability, or moral commitment.Results also indicate that European companies do not value sustainability tothe exclusion of financial elements, but instead project sustainability commitment in addition to financial commitment. U.S. companies focus more heavilyon financial justifications, whereas European Union companies incorporateboth financial and sustainability elements in justifying their CSR. Europeancompanies have a leading role in the CSR movement as a sustainable development opportunity (Hulm, 2006).One source of ongoing CSR commitmentis reflected in the number of articles focused on the need for corporations totake an active role in poverty reduction efforts. This literature often concludeswith a call for a more explicit acknowledgement of poverty in the corporatecitizenship field and for corporate leadership to name the issue, frame it insuch a way as to accelerate its reduction, and take an active role in povertyreduction efforts (Boyle & Boguslaw, 2007). Companies must push to seeksomething other than the lowest short-term cost for the highest short-termgain (Berkhout, 2005). Misconceptions and inaccurate assumptions existabout business opportunities and profitability available at the bottom of theeconomic pyramid. By serving the poor, business can gain new sources ofrapid revenue growth and greater efficiencies with cost reduction initiativesfor the multinational corporations, which also translates to increased purchasing power for the local consumers, as well as access to innovation (Prahalad& Hammond, 2003).Corporate Identity and EthicsThe key attributes that define a company’s essential character and thecontemporary turn to values reflect an evolution in what has sometimes beencalled the personality of the corporation—or the corporation’s identity (Paine,2003). Corporate identity reflects what a company really is, rather than what acompany might advocate.
6Corporate Social Responsibility and Sustainable BusinessMany companies have established a corporate identity using branding,which has become a focal point of their success and competitive advantage(Werther & Chandler, 2006). For example, the Body Shop, through its leaderAnita Roddick, adopted a number of fair trade and other social issues. Thesestances helped differentiate the firm’s offerings and made responsibility figureprominently in its corporate identity in the minds of consumers.According to Archie Carroll (1991), a firm’s pyramid of CSR starts witheconomic responsibilities and continues with legal, ethical, and discretionaryresponsibilities respectively. However, what was ethical or even discretionary in Carroll’s model is becoming increasingly necessary today because ofthe changing environment within which businesses operate and because theethical responsibilities are more likely to stand on a par with economic andlegal responsibilities as foundational for business success (Werther & Chandler, 2006). CSR can be a way of matching corporate operations with societalvalues at a time when these parameters are changing rapidly. As such, ethicalbehavior is a prerequisite for strategic CSR. A company’s ethical behavior isthe mirror image of its culture, a shared set of values and guiding principlesdeeply ingrained throughout the organization (Paine, 1994), and the ethicalbehavior and culture become part of the definition of corporate identity.CSR and AccountabilityAccountability is one of the processes whereby a leader, company, ororganization seeks to ensure integrity. In a global stakeholder society, accountability is among the key challenges of organizations. Responsible leaders are concerned with reconciling and aligning the demands, needs, interests,and values of employees, customers, suppliers, communities, shareholders,nongovernmental organizations (NGOs), the environment, and society atlarge. A company’s track record in terms of CSR accounting will be effective when appropriate CSR measures are included in its internal as well as itssupply-chain activities. Furthermore, the literature reflects a growing need fordissemination of good practice in CSR accountability and a need for morepressure to be exerted on NGOs to prove themselves as ethical, transparent,and accountable as those they seek to influence (Frame, 2005).A relevant point raised in some literature has to do with the effectiveness of strategies undertaken by communities to demand corporate accountability (Garvy & Newell, 2005). This literature argues that the success ofcommunity-based strategies for corporate accountability is conditional uponthe right combination of state, civil, societal, and corporate factors.
Key Themes7Frynas (2005) makes the point that accountability is more than makingfalse promises. In the oil, gas, and mining sectors, despite the promise of CSRand the spending of over US 500 million in 2001 alone on a long list of community development programs and other CSR initiatives, the effectiveness ofthe initiatives has been increasingly questioned. Frynas points out that there ismounting evidence of a gap between the stated intentions of business leadersand their actual behavior and impact in the real world of financial funding.CSR requires accountability by all leaders, individuals, organizations,stakeholders, customers, and community members, and yet accountabilityis complex. The factors which influence the effectiveness of corporate accountability are multiple and tightly interconnected. This interconnectednessand its relationship to accountability are represented in the work of Dolan(2004), which uses the example of his own company to illustrate the idea ofconsidering a business as an interconnected web of relationships, with theconsequences of every action the company takes having an impact on both theworld and the company’s long-term business.Partnering with StakeholdersCSR is strictly embedded with a multitude of business actors. With thecall for sustainability and the new role of business in society (Blowfi
2 Corporate Social Responsibility and Sustainable Business traditional boundaries of the organization. Most organizations can be placed somewhere in between. Corporate responsibility or sustainability is therefore a prominent fea-ture of the business and society literature, addressing topics of business ethics,
Chapter 2: Social License Chapter 3: CSR Motives Chapter 4: Laws of CSR Chapter 5: Role of Private Companies . Chapter10: Corporate Social Entrepreneur Chapter11: Business Ethics Chapter12: Corporate Governance . Chapter 1 Introduction of CSR Corporate social responsibility Corporate social responsibility (CSR, also called corporate .
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